Preferential Trade Agreements in Services: Friends or Foes of the Multilateral Trading System?

A fashionable feature of new generation preferential trade agreements (PTAs) has been the inclusion of a trade in services component. Does this trend imply a fundamental shift in the governance of world services trade towards fragmented and discriminatory trade arrangements? This paper will use the experience of PTAs negotiated so far and the literature on the political economy of regional integration to analyze the nature of preferential services liberalization and its consequences for the multilateral trading system. It will argue that these agreements unleash political economy forces that both help and hinder further progress at the WTO.